EDUCATION: As more cuts loom, school districts deplete reserves to new lows

Despite years of cutbacks, layoffs and unpaid furlough days for employees, school districts are continuing to run low on funds and are depleting their reserves to record lows, recent budget adoptions show.

Several districts have lost half of their reserves in recent years after repeatedly dipping into the accounts to keep up with expenses while their revenue has decreased because of state cuts, and in some cases, declining student enrollment.

Even proposed tax hikes on the November ballot would not be enough to offset budget cuts planned in the new fiscal year, many educators say. Three tax initiatives have qualified for the November ballot, including one proposed by Gov. Jerry Brown that would generate $8.5 billion for the state.

"If the state of California doesn't get their act together and stop balancing the budget on the backs of our K-12 school districts, we'll all be broke by the end of the 2012-13 school year," San Pasqual Union Superintendent Gary Wilson wrote in an email to the North County Times last week.

"Our class sizes will be larger this coming year, and money for supplies is limited," Wilson continued. "We will have to consider furlough days for the 2013-14 school year, and may need to negotiate furlough days for the second half of the 2012-13 school year if the November tax initiative doesn't pass."

Coastal North County districts also have significantly reduced their reserves.

San Dieguito Union High School District's reserve has dropped 63 percent in the past two years, Carlsbad Unified's has dropped 76 percent and Encinitas Union is down 59 percent.

School districts are required to submit balanced budgets, but Graeff said the county allowed Ramona Unified to submit its budget with a negative ending balance because the district still is negotiating with the teachers union on a contract that could include concessions that would balance the budget.

Things could get ugly, though.

Graeff said the district is asking teachers for a 12 percent pay cut, and so far the counteroffer is the equivalent of a 1.5 percent cut. If one of the two sides declares an impasse and a state-appointed mediator is unsuccessful, the district could make a unilateral decision to reduce wages, which teachers could accept or go on strike, he said.

Graeff said the district has little choice but to look at salary cuts.

"The district has been asking for employee concessions for the past three school years," he said. "Until now, we've found a way to get along without going to the mat over the issue."

The district cut $4 million in spending, mostly through layoffs and reductions, before adopting the new budget.

"But the difficulty is, our revenue side keeps getting reduced by the state faster than we can cut our expenses," Graeff said.

In June, the district adopted a budget with $5.7 million in deficit spending, a gap that it is filling with its reserve. As adopted by the board, the balance at the end of the 2012-13 school year will be negative $1.3 million.

San Marcos Unified and Ramona Unified have "qualified" budgets, a term used by the state for districts that cannot guarantee they will meet financial obligations for the next two years.

One step beyond a qualified budget is a "negative" budget, meaning a district admits it cannot meet its obligations. At that point, the state would take control of the district.

"We have no doubt that we will avoid that," Graeff said, adding that the district can resolve its budget crisis for this year and 2013-14 by trimming $4 million from spending.

In San Marcos Unified, the ending balance in the 2012-13 budget was $3.5 million, down 74.6 percent from last year and 83.3 percent from 2011-12.

As with Ramona Unified, rebuilding the reserve in San Marcos Unified will rely on reducing salaries, according to Assistant Superintendent of Business Gary Hamels.

Technically, the ending balance is whatever is left over at the end of the year. That amount includes dollars that are restricted to specific expenses and money set aside for "economic uncertainties."

The state had required districts to set aside at least 3 percent for uncertainties, but in recent years it has lifted the minimum for districts that have a plan to replenish the fund.

Hamels said San Marcos Unified's new budget has an emergency reserve of just 1 percent, but that amount would increase if teachers agree to salary reductions and a proposed tax increase passes in November.

Other cuts already have been made, Hamels said. The district has not had new textbooks in years, for instance, and its deferred maintenance program has been reduced from $1 million a year to $70,000.

In the Bonsall Union School District, the reserve has dropped 31 percent in two years as the district dipped into it to offset deficit spending.

"We're spending $300,000 more than we're bringing in," said Tom Krzmarzick, the assistant superintendent of business services in Bonsall. "That's a going-out-of-business model. And if this happens for another two years, we'll be out of business."